One of Facebook’s directors and largest investors, Peter Thiel, tells the magazine about the apparent misadventures in trying to get a deal done with the folks and Twitter. We know the outcome on this one was a “No deal!” but because all of this was happening last fall during Twitter’s meteoric rise makes it pretty interesting.

This is the first time there has been a public recognition of these talks. Facebook is still looking to expand but Thiel shapes up the attempted union with Twitter as follows

Thiel said the parties disagreed over price and structure when they seriously considered a deal last fall. “It became pretty clear it wasn’t going to happen,” Thiel says from the mid-Manhattan office of his hedge fund Clarium Capital. “The deal would have to be done with Facebook stock. And then you have to figure out how much the stock is worth.”

As noted by Thiel it’s a sticky proposition trying to value the stock of a company that has no liquid market. The valuation of Facebook at $15 billion used for the investment by Microsoft no longer applies The internal valuation found in court documents of $3.7 billion that occurred at about the same time as that deal with Microsoft shows that the Redmond company had either seen something Facebook didn’t but that’s for another story.

While the two companies still talk there appears to be no interest in any deal that involves Facebook stock because its valuation is a moving target at best. While it appears that Microsoft overpaid considerably there may not have been another one of those born in the next five minutes (sucker, anyone?).

Twitter has recognized that the stock valuation was the main sticking point in the negotiations that had a value on Twitter at the time around $500 million. Since then however, Twitter has been growing at breakneck speed and appears to be in no hurry to get involved in any deals.

Representatives of Twitter liked the sound of $500 million but balked when Facebook said its stock was worth $8 billion to $9 billion. Twitter’s team knew that Facebook was letting employees sell stock on the secondary market at company valuations ranging from $2 billion to $4 billion. “We said it’s not worth it,” the person says. “Don’t treat us like children.”

Add to that the belief from Twitter management is gaining serious momentum and not even near its full potential and it certainly makes sense that they wait for the best deal.

As for Facebook, they continue to move forward. A rumored hiring freeze has been set aside and Thiel states that the focus is on getting the product right and not on turning on the ad faucet which is what made MySpace what it is today (unusable?). With other board members like Marc Andreesen saying that Facebook could generate about $1 billion per year right now that must be hard to keep away. The question is as Facebook keeps making gaffes that get their users upset just how receptive will the community ever be to attempts to monetize the service?

This is a question that not only haunts Facebook but Twitter and many other social media vehicles. The question is as Facebook keeps making gaffes that get their users upset, how receptive will the community ever be to attempts to monetize the service? This is a question that not only haunts Facebook but Twitter and many other social media vehicles. It’s likely that during this downturn caution will be exercised but someday these folks have to turn a profit, right?

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"That’s why all the links on Yahoo.com either go to other Yahoo properties or to Yahoo partners. These include VanityFair.com, Salon.com, SFGate.com, Lifehacker, and Gizmodo. (Disclosure: TechCrunch’s sister site CrunchGear was included when Yahoo was beta testing this feature). The sites are selected by human editors at Yahoo".

A Yahoo spokesperson reported:

"Yahoo! will select outside content from a wide variety of sites across the Internet (large and small, with sufficient traffic management capabilities), that have unique or exclusive content which will be programmed alongside our usual links to related Yahoo! content."

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Facebook Bubble Cult Pushes Value To $100 Billion

Well, Jason Calacanis calls it "full-blown madness," but I like the drama of cultish mass delirium better – it brings up imagery of frothy mouths, rolled back eyes, and bacon-frying twitchiness.

Reporting from the Graphing Social Patterns conference, for developers and marketers looking to better utilize the Facebook open platform, Calacanis says a panel of fans and investors valued Facebook at $100 billion and predicted the annihilation of Google and MySpace at the hands of Mark Zuckerberg.

And some of us thought $8 billion and $15 billion were steep valuations. Under the same math, Calacanis says that makes Google worth about $14 trillion. Is there even that much money in the world?

There were other claims made, but these are enough to make you dizzy, or go mad. "[T]his is the kind of madness that got us in trouble the last time around (i.e. 1999)," says Calacanis.

If you believe all that, I’ve got a novel I haven’t finished writing yet that’s guaranteed to sell 3 billion copies – yes, half the world will read it and I’ll never have to work again.

If Facebook, with half the traffic and a third of the pageviews of rival MySpace, has reached such heights by opening up its platform to developers, what happens when MySpace does the same?

Or maybe, if Microsoft’s Steve Ballmer was erroneous in his "faddish" assessment of Facebook, then Rupert Murdoch must be stupid? News flash: Murdoch has proved, whether you like him or not, that he is the best at playing this game.

And as for the annihilation of Google…well, we’ve heard that before from more than a few much larger and more successful online properties than Facebook.

For charts and graphs and more madness, check out Calacanis’s lengthy post.

Gmail Storage Ticks Upward, Lags Yahoo, AOL

Not very long ago, storage on web-based email measured in the megabytes, and not very many of them, either. When Gmail arrived with its 1GB inbox, invites to the service became a hot commodity.

Google’s decision to take advantage of what has become an inexpensive commodity, storage, spurred interest and gave the company another place to drop its signature contextual advertising. As of market close on October 11, Google’s $622 share price gave it a market cap of over $194 billion.

We can’t tie that directly to Gmail, of course, but Gmail likely didn’t get in the way of that rise, either. Google plans to give a little back to the Gmail users in the form of more storage:

In April 2005, we started increasing Gmail storage as part of our “Infinity+1″ storage plan. At that time, we realized we’d never reach infinity, but we promised to keep giving Gmail users more space as we were able. That said, a few of you are using Gmail so much that you’re running out of space, so to make good on our promise, today we’re announcing we are speeding up our counter and giving out more free storage.

In Google Apps, Gmail accounts start at 2GB, except for Premier Edition accounts, which begin at 10 GB. Now, the 2GB accounts will receive their own spinning counter, while the 10GB accounts receive a nudge to 25GB of storage.

Nice numbers, and for someone who used to have to obey a 20MB email limit in the corporate world, they are huge. But when it comes to truly fantastic amounts of email storage, one has to look at Yahoo Mail and AOL Mail.

Both of these Gmail competitors have millions of users, and unlimited storage for their free webmail accounts. If storage is really an issue for email, Gmail is at best the third choice for people today. Tomorrow, who knows?

Values And Egos Inflate: The Bubble Returns

Bubble. There, I said it. Just two years ago, a half-billion dollars for MySpace seemed a bit on the frivolous side. But now it’s obvious News Corp. got in on something before the rest of the media world caught on, especially as Facebook, with a fraction of the audience, demands a steeper and steeper price.

But, say supporters of these valuations, it’s not just the size of the audience or the annual revenue taken into account, but the margins of profit they bring in. Online properties, especially Web 2.0 properties, are so low-cost to run compared to brick-and-mortar one that it’s not unreasonable for them to sell for as much as 100 times earnings. 

Critics were blisteringly quick to point out Henry Blodget’s unpardonably sinful Wall Street history of inflating values just before the dotcom bust – the term "gasbag" came up in one place, in lieu of bubble. Blodget argued Tuesday that Google shares could hit $2,000 one day.

This number, even as we remember the flack analyst Jim Cramer got flack for suggesting GOOG might reach $800, earned no shortage of scorn (and attention); TechCrunch’s Michael Arrington called for Blodget to be "muzzled."

In an ironic twist, Douglas McIntyre, editor of 24/7 Wall Street crunched numbers suggesting blogs like TechCrunch and The HuffingtonPost were worth upwards of $100 million to outfits like CNet or the Washington Post, as big media organizations look to find less expensive ways to build a loyal, sustainable audience.

Blodget concurred with that valuation; Arrington decided Blodget shouldn’t be muzzled after all; and Howard Lindzon, creator of CBS-owned Wallstrip, thought it quite funny "the lamest asshat on the internet" (he means Arrington) was buying into the hype.

Potshots aside, are we or are we not looking at (or standing within) the next dotcom bubble. If so, will it burst?

Lindzon seems to have his umbrella ready. "We just started another bust in real estate," he tells WebProNews. "This is another side book and may not end until the China Olympics. Obviously the global new wealth is not as sophisticated about the dangers of asset bubbles and it will be especially ugly when it ends."

Cynthia Brumfield, president of Emerging Media Dynamics, Inc., seems to agree these valuations are bubblish, but that’s not necessarily a bad thing.

"I do think these valuations are over-the-top but I don’t think a ‘bust’ is imminent," she said. "For one thing, Facebook and Huffington Post are privately held companies and individual and institutional investors in general will probably be spared the rude smack of any ultimate come-down in value. 

"They might feel a trickle-down effect in the sense that Microsoft, for example, might have to write-off some portion of its investment in Facebook, but that loss will be blended into a very big company. As for Google, investors are already forewarned that it might be overvalued even at today’s prices, and that doesn’t seem to spark much fear."

Even then, eBay’s not so happy about the $2.4 billion they shelled out for Skype – and they were warned rather loudly then. How many overpriced purchases can the major players afford to make?

The answer to that may be relatively simple. There is an echo of Brumfield’s assertion that the Microsofts and eBays of the world can afford to overpay in the words of McIntyre. They can afford it because the cost of running Web 2.0 companies is virtually nil.

"We know that Huffington raised $10 million from Softbank and other VCs," said McIntyre. "With the election year about to begin, Huffington’s pageviews, advertising, and value are only going to rise. Is $100 million the right number? No one knows that, but I think $75 to $150 [million] is not even close to wild, especially given the strategic value that a strong online brand could have for a company like the Washington Post."

An online property bringing $1 million annually, for example, could pull in 100 times revenue because of the relative low cost of operation.

"What people don’t want to look at is the value of these brands and how inexpensive they are to run compared to traditional media. The margin leverage is tremendous."

Many web companies significantly profit from the appearance that they are open, but anything of value eventually needs to have some limitations placed on it. In spite of no longer having MovableType installed on this server, the mt-comments file is one of my most requested files. Registration moves you away from The Tragedy of the Commons to something more sustainable.

Asking people to register suddenly makes them nicer because it makes the audience less robotic, and the most mean spirited people are not like to remain once anonymous disappears. It is harder to leave anonymous troll comments without being figured out if you have to create an account to post them. And who has time to set up 100 different accounts?

If you can sell a few people a day then you can also sell the idea of a free subscription with future bonuses to dozens or hundreds of people. It is easier to sell in small steps over time than it is to go from anonymous to sold. Pre-selling works so well because people not only learn to trust you, but they are already satisfied with your product BEFORE they purchase it. Some people ask me to do an in depth site review to try to sell them my ebook. I tell them that I do not do that because if they are not pre-sold on me then an exchange is likely going to be a mutual waste of time.

Exceptionally large communities are just as bad as anonymous communities because members have little in common, and relevancy rarely is aligned when everyone is the same. Without leaders a community is dominated by spam, poor communication, misunderstandings, and hate. I can’t tell you how many porn messages I see browsing YouTube, and I just got this feedback on one of my videos:

No doubt this dude’s got about 3/4 sugar in his tank. The "information" in the video is just more rehashed content available anywhere on the countless webmaster & marketing forums found all over the Web. Beyond the gay plagiarist guise, notice the example; seems we have a little Google/CNN toady here pushing THEIR brand not yours. Silly goy; he doesn’t mention that all you need to be successful & dominate any industry is be a loyal satanic zionist. That’s the true Google/CNN business model.

Posting the same information on my blog got much better feedback. And writing an article for Wordtracker got great feedback too. Why? Likely because I am relevant to their audience, and anyone who has subscribed to a free newsletter and clicked through to the web article likely wants to consume information.

Clay Shirky’s A Group Is Its Own Worst Enemy highlights many of the reasons that smaller communities are more meaningful and useful than large communities. If a site gets to the scale of a Google or a YouTube it must deal with endless spam. For most publishers it is best to be semi-porous, to get the benefits of being branded as being open, and allowing just about anyone to join or participate, but have some level of investment (time or money) required to do so in order to minimize noise.

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